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Getting Ready for Year End: 1099 Prep

Getting Ready for Year End: 1099 Prep

Businesses employ independent contractors all the time, in multiple capacities. Perhaps you hired a freelance designer to create marketing materials for your business this year, or maybe you brought in an independent consultant to develop strategies to improve your operations. If you used a contractor or vendor this year and paid them $600 or more, you need to be prepared to issue them a 1099 tax form by January 31.

1099’s can be complicated and confusing, dreaded by employers and contractors alike. Even if you have experience with issuing or filing 1099s, you may have missed recent changes in tax laws that might affect you this year. Unfortunately, the consequences of failing to use 1099s properly can include fines and penalties, so understanding these complexities is essential. Here are some steps and considerations to keep in mind as you, the employer, prepare for the end of the year.

The first step is to figure out which 1099 form your contractor will need. As of 2021, there are 20 varieties of 1099 forms, but the 1099-NEC (non-employment compensation) form and 1099-MISC form historically have been the ones most commonly used for contract employees who were paid $600 or more during the year. 

Use the Proper 1099 Form 

Why is this important to know? Until 2020, the 1099-MISC form was used to report payments to independent contractors and vendors for services rendered, but differing due dates created loopholes in the system that were being abused. As a result, beginning in 2021, the 1099-NEC was reinstated to report all payments to non-employed individuals. This covers nearly all contract/freelance work, with a few rare exceptions that may still require a 1099-MISC form. 

Always consult a tax professional if you have any questions or uncertainties about which 1099 form you need to issue to your particular contractors and vendors.

Accurate Compensation Records

The next step is to ensure you have all the information needed before issuing 1099 forms to your contractors. Some important questions to consider are, do you have an accurate account of which contractors and/or vendors you used this year, and how much you paid each of them? Implementing a system at the beginning of the year to keep an accurate account of who you are contracting and how much you are paying them will keep you organized and on track when it comes time to issue 1099 forms.

Update Contact Information

Do you have up-to-date and accurate ways of contacting them? Sometimes contractors and vendors move locations or change their contact information. Fall is the perfect time to start making sure you have their up-to-date details, so your 1099 forms get to where they need to be on time (keep in mind that January 31 is the deadline for mailing 1099s to most taxpayers.)

This feels like the right time to re-emphasize the importance of implementing a system and process to keep an accurate account of all these details as early as possible. In today’s paperless, digitalized world, we love software like GUSTO that has digital payroll options for managing your contract employees Additionally, we use Track 1099 when it comes time to e-file on behalf of clients. Still, whether you choose to use the latest software or hire outside professional accounting help, the most important thing is that you have a process in place to ensure you don’t forget about your contract employees and vendors.


At System Six, we pride ourselves on staying up to date with the latest tools and technologies to help clients keep their books clean and organized all year long, setting them up for success during tax season and beyond. So, we focused year round on 1099s (collecting vendor information throughout the year, for example), but now that  it’s approaching year end, it’s your turn as well to prioritize 1099s! 

Does the process of preparing to issue 1099s to your contracted employees confuse or frustrate you? Are you feeling overwhelmed about your 1099s?  We’d love to chat. Please reach out.

Conference Takeaways

Conference Takeaways

In October, I attended two different accounting conferences back-to-back – the first industry events we’ve been able to attend in the last 18 months! Meeting, networking and learning from so many great industry partners and experts was quite invigorating. Importantly, I also left the conferences excited about the continuous evolution of our industry and the opportunities it creates for System Six to continue to grow. Here are the main takeaways from Thriveal’s Deeper Weekend and Scaling New Heights

Relationships Matter 

The currency of our industry is shifting. While transactional services still underpin everything we do, clients more and more expect and need value-add advisory services. Clean books will always be the foundation of quality accounting, but the rise of cloud technology has led to endless integration possibilities, making transaction management less cumbersome than in years prior. So what does this mean for bookkeepers? We’ve got to continue to build and lean into our relationships as agnostic, trustworthy advisors. We’ve got to continue to educate ourselves on all the problems our clients are facing – not just their accounting challenges – so we can provide advisory services beyond just finance. So for System Six, in the coming months and years, we’ll be working on finding new ways to deliver value to our clients, whether through deeper financial advisory capabilities, additional support for HR management, or even technology advisory. Ultimately, we hope to continue to deepen our relationships with customers so that we may best serve them and enable their success. Building this deeper foundation of meaningful relationships rather than transactional services is the future of our industry. 

Ever-Expanding Toolbox 

Innovation is the heartbeat of the tech world. In every industry, new services, programs, apps, and vendors emerge every quarter. At these conferences, I had the opportunity to hear firsthand about the latest initiatives, features, and products heading to market. Some will provide healthy competition for some of our favorite vendors like Bill.com and Gusto, who themselves continue to improve. At the same time, others are finding success in filling niche spaces in security or uncategorized transaction automation. We will keep tabs on several vendors as they develop and expand so that we can provide the best service to our clients. 

Quickbooks is Reinvesting 

While Quickbooks is still our go-to cloud-accounting software, they’ve gotten flack across the industry in the past few years. Whether from the launch of QB Live, a competitor to many bookkeepers, or because of less than satisfactory customer service, the ecosystem has been frustrated with them of late. Fortunately, they are focused on doing right. They are reinvesting in their accounting partner community by overhauling their customer service, reducing wait times, and providing robust training for firms. We look forward to continuing our partnership with Quickbooks and appreciate their efforts to better serve firms like System Six. 

Great Industry Ecosystem 

The business world often gets a bad wrap as having a cut-throat, competitive culture, but I was pleasantly surprised otherwise. Everyone I met was friendly, encouraging, and supportive. The atmosphere was full of camaraderie and different individuals championing one another. Rather than approaching the industry with a scarcity mindset, other firm owners recognize the endless number of potential customers and the wide variety of unique services in the market to differentiate firms. I left feeling immensely appreciative of “competitors” who treated System Six more like a partner, willing to share information, resources, and encouragement. Take heart; there are fabulous firm owners leading the charge into the next iteration of cloud accounting services.

Catch Up & Clean Up for Mergers & Acquisitions

Catch Up & Clean Up for Mergers & Acquisitions

If you’ve ever gone through the process of selling a house, you probably know about that in-between season that lies between living normally in your house and handing the keys over to the new owner. It’s a season of cleaning up and making necessary improvements so that when you eventually do put your house on the market, it’s being presented in its absolute best light. 

The same is true when you’ve made the enormous decision to sell your business! Even if you are confident in its value, a season of catching up and cleaning up your financial operations is essential to getting the most value out of the sale of your company. 

Of course, like haphazard cleaning and cheap improvements to your house before selling won’t add value to its sale, making last minute improvements in your business’ financial operations won’t pay out – in fact, the opposite may be true. Savvy buyers are on guard for unorganized, sloppy bookkeeping. If your books don’t add up, or there are expenses that can’t be categorized correctly, you’re going to lose value in the sale.

There’s also the matter of reputation to consider here. You’ve invested years into creating what your business is today. What do you want the sale of it to say about your company? What do you want it to say about you? 

You could be seen by potential buyers as an “old-school” unprofessional, or you could be seen as someone whose confidence in the value of their business shows clearly in the way you pay attention to even the most minute detail in your business’ bookkeeping

The choices you make in this in-between season before selling will not only impact the value you get out of the sale, but will also affect your legacy.

We’ve honed in on three specific areas that should be top priorities as you get your business’ books cleaned up and ready for a sale.

Every dollar needs to be accounted for in as much detail as possible.

When you’re preparing to sell your company, there is a ton of information you will need to have ready to show potential buyers. These include your financial records, a minimum of three years worth of profit/loss statements, net income statements, tax returns…the list goes on. 

It may seem obvious, perhaps, that all these numbers need to be properly balanced and accounted for. What may be less obvious is the value of breaking down these numbers in greater detail than you might assume necessary. 

You may be used to using one Quickbooks entry for your company’s “expenses,” but breaking those expenses down into specific, detailed categories (such as regular salaries vs. overtime pay, differentiating travel and entertainment expenses from regular expenses, highlighting parts and labor, etc,) will give potential buyers a lot more confidence in the true profits and expenses of the business. 

Identify and remove personal expenses you’ve been running through your business.

Sometimes business owners try to “add back” the value of the personal expenses that they’ve written off through the company, such as family health insurance or personal travel expenses. Problems arise, however, if you have insufficient data to prove to your buyer that these expenses were truly personal. 

We recommend identifying and removing these personal expenses from your books, ideally 18 months to a couple of years before putting your business up for sale. This protects your reputation as being transparent and honest, and lessens unnecessary confusion when it’s time to show your statements to potential buyers.

Identify and stop occasional expenses that aren’t recurring.

In that same vein, identifying random, occasional expenses will go a long way in helping clean up your bookkeeping. Perhaps you paid a large, one time payment for a marketing campaign, or sank some money into updating your company’s website. These aren’t recurring expenses for your company, but it can be hard to prove that to potential buyers as they’re looking over your books. We recommend starting to identify and stop spending money in these one-off categories at least two years in advance of selling your business. This will increase your profitability, which will help you sell for a higher value!

Is the reward worth the extra effort?

It’s a simple yes. With clean books, you’ll be a more trusted and therefore desirable target for buyers. 

But, don’t just spend time ahead of your sale simply cleaning up your books. The next buyer is likely going to come in and implement updated, efficient systems to the business’ financial operations when they take over. This saves them time and money and therefore increases the value of the business right from the start. They’ll make sure you’re using the latest accounting software, and leveraging good third party tools for efficient bill pay and payroll processing. 

Why leave this work for the next buyer? While you are cleaning up your books, also take the time to modernize your financial operations, thereby saving you time and money and increasing the value of your business.

The value you gain will be more than worth the extra effort – and you don’t have to do it alone.

At System Six, we are here to help. Day in and day out, we are helping businesses manage their financial operations and bookkeeping efficiently and accurately. And we love helping organizations get to that point – nothing gives us more joy than sitting back with a client after a few years of hard work and seeing decreased stress and increased profitability as a result of improved bookkeeping.   

Are you looking towards the future, and considering what you can be doing right now to get the most value out of your company when it comes time to sell? Consider letting us help you improve your bookkeeping and the overall efficiency of your financial operations.

How to Structure Accounting for Multiple Personal Properties

How to Structure Accounting for Multiple Personal Properties

What you need to know about managing the finances for your growing real estate investments.

Purchasing multiple properties can be an excellent investment path, allowing you to grow your assets while potentially making some extra income at the same time through leasing. However, owning and managing multiple properties can become a pain point for you and your CPA when it comes to bookkeeping, particularly when tax season rolls around each year.

It can become complex and confusing to track income and expenses for individual properties when they are all kept under one Quickbooks file, making filing taxes a nightmare.

At System Six, we believe you can achieve accounting success by understanding the proper tax structure for multiple properties, keeping your individual properties’ bookkeeping separately organized, and utilizing available up-to-date technology to keep your bookkeeping balanced and easy to track.

As an owner of multiple properties, one roadblock that may surprise you when tax season arrives is realizing too late the headache that filing all your properties on one tax file can bring you and your CPA. Whether or not multiple properties are LLC’s, filing each entity individually will make the accounting process much less confusing. Setting yourself up for success starts with making sure you are structuring your bookkeeping correctly.

How to Structure Your Property Accounts

Each of your properties should ideally have its own Quickbooks file and profit/loss/balance sheet. Trying to keep track of each property’s expenses and income streams under one personal bookkeeping file is potentially a costly discrepancy just waiting to happen. You can safeguard your assets and investments by organizing your properties’ bookkeeping individually (not to mention your CPA will thank you for making their job much more time-efficient)!

If you use your multiple properties as a source of income by leasing them out, it will serve you well to open individual banking accounts for your properties. Separate lines of credit and bill pay systems for your properties will make expected costs such as utility and cable bills easily trackable and accounted for.

Sometimes owning multiple properties becomes even more complicated – what about situations where you have multiple properties under individual entities that income from your properties has to be regularly allocated to?

Utilizing class and location tracking will give you another valuable layer of data to help you precisely track how much revenue from your properties needs to be allocated to an overhead entity. Class and location tracking is an opt-in feature on accounting software, like Quickbooks, allowing users to group expenses or invoices by location and department.

Even though structuring your accounts and bookkeeping individually will undoubtedly keep your accounts safer, more organized, and trackable, we understand that it can be overwhelming for property owners to tackle that front-end work of setting up individual bookkeeping, tax files and lines of credit for their multiple properties. This is especially true for property owners who have been keeping their properties’ accounts on one Quickbooks and tax file and want to restructure their bookkeeping to keep their properties’ individual bookkeeping and tax work separate from each other.

You don’t have to tackle this alone! Here at System Six, we are passionate about utilizing the latest technology and tools available to help our clients with multiple properties keep their bookkeeping organized and balanced. Let’s chat.

How to Simplify Small Business Tax Prep

How to Simplify Small Business Tax Prep

At Systems Six, we recognize that feelings of stress and being overwhelmed are commonplace for many small business owners during tax season, which is why we want to equip you with principles to simplify your tax prep. On a micro level, your taxes are impacted by daily transactions: running payroll, writing invoices, paying vendors — each of which look back upon actions previously done. Zooming out to a macro level, the same data needed to execute your taxes will also be needed in the future if your business gets audited, you need financing, or are looking to sell. When new seasons of business or big decisions come knocking, we want you to be prepared. Here are three tips our expert bookkeepers recommend to simplify your tax prep and serve your goals on micro and macro levels:

1. Use proper digital record keeping systems

The foundation of your tax prep is the same systems you use to accomplish tasks like payroll and paying bills; they must be organized and accessible. We recommend using online, cloud-based tools. Our team advocates for Quickbooks to be your central online hub through which all other platforms connect. Using other platforms like Bill.com for bills, Ally for receipts, and Sharefile for shared documents will complement Quickbooks and assist in managing an efficient and accurate paperless accounting system. Finally, Gusto, a time-tracking and payroll system, is recommended by our team. At the end of the year, Gusto will send W-2’s to each of your employees digitally. By using these systems, your books will be ready for a tax preparing CPA to effortlessly step in and carry out your taxes without needing to spend hours digging for correct information.

2. Maintain bookkeeping hygiene 

Using a simplified, cloud-based system for the foundation of your tax prep is essential; however, it can be easy for your books to become messy without upkeeping these systems. We recommend performing weekly and monthly upkeep tasks to ensure that your files stay organized, your receipts are all accounted for, and your books remain clean. Staying on top of these day-to-day tasks will aid in preparing your business for tax season. Ignoring the stack of receipts throughout the year will only lead to panic when your CPA comes knocking.

3. Reconcile your Quickbooks account

Reconciling your books is an easy task, yet it makes a profound impact when it comes to having truthful and accurate books. Comparing your books with your bank statement brings accountability to your work.  Quickbooks is a phenomenal online tool, but the IRS begins with your source documents and builds from the ground up to validate your books. Therefore, reconciliation is essential to the promotion of transparency and accuracy with your bookkeeping. 


Tax prep doesn’t have to be overwhelming, but it requires organized, daily bookkeeping practices to ensure accurate data. By using digital platforms, maintaining the hygiene of those platforms, and reconciling those platforms with source documents, your company will have significantly simplified the preparation process.

A Tale of Two Financial Firms

A Tale of Two Financial Firms

It’s storytime on the blog this week! Do either of these tales sound familiar to you?

Flash Drives and Checkbooks

The advisors at Neighborhood Financial were losing their minds and perhaps more alarmingly, their valuable time.

It was the last Friday of the business month and, as was becoming far too common, financial advisors/business partners Jake and Lisa were scrambling to make sure their individual income accounts and their joint business account were correctly balanced.

As with most financial firms, bookkeeping needs at Neighborhood Financial were complicated. Along with individual income streams and expenses, the business partners’ joint venture account had to be regularly contributed to by both team members. They had hired an independent accountant to handle their books long ago – so why were they still not 100% sure of where their accounts stood and who owed how much to their joint account every month?

With the chime of the office doorbell, the answer to that question walked in the door with a flash drive in one hand and a stack of unsigned checks in the other.

Fred the accountant had years of experience and a winsome personality that built loyalty and trust with his customers. Unfortunately, he was falling farther and farther behind on the latest banking and bookkeeping systems and tools that make modern bookkeeping organized and efficient.

Fred the accountant still kept Jake’s and Lisa’s individual books on a flash drive that Jake and Lisa only had up-to-date access to whenever Fred was able to stop by. Fred still handled expenses and payments with paper checks, reports and receipts. It was simply the way he had always done things. 

It took up quite a lot of their valuable time for Fred to help Jake and Lisa figure out how much each of them needed to contribute to their joint account each month, and the sums varied so wildly month to month that neither of them were ever sure if they were over or under contributing. 

“There’s got to be a simpler, more dependable way to do this,” sighed Jake, rubbing his forehead after Fred left with the stack of freshly signed checks. 

“This is becoming too stressful for us individually, and for our partnership,” agreed Lisa. “I think we need to make a change.”


How much of a difference can expert help and up-to-date tools make for financial businesses?

It may surprise you that the answer is more than you might think.

Staying two steps ahead of the latest tools, systems and technologies for financial business bookkeeping is becoming a necessity for those who want to stay ahead in today’s quickly evolving world. More than ever, today’s financial businesses need expert help with a deep understanding of the most accurate and efficient bookkeeping tools on the market so that they can focus on what they value most: serving their customers.

Something we have noticed among our clients is that some businesses are leery of switching from old, manual ways of accounting because they are afraid they will lose the personal touch that comes with the long standing relationships that develop over years working with a single accountant. The learning curve of newer systems and technology seem overwhelming and businesses worry it will take too much of their time.

We believe you shouldn’t have to choose between personal attention to detail and the most efficient, up to date technology. You deserve both.

At System Six we work hard to stay ahead of the curve when it comes to the best, up to date systems and tools available for bookkeeping so you don’t have to. We are also just as committed to building long lasting relationships with our clients – relationships built on great communication and personal attention to the details that matter for your business.


21st Century Solutions to 21st Century Challenges

Jake and Lisa made the decision to change how they were handling their business’ bookkeeping. 

By outsourcing their bookkeeping needs to a company that was up to date with today’s best technology, Jake and Lisa began to see immediate improvements in the areas that previously caused so much frustration and stress.

The new bookkeeping team used tools to analyze past years’ spending to project more accurately how much Jake and Lisa needed to be contributing to their joint account each month. Their payments became more consistent so there were no longer last minute surprises at the end of every month.

While trying to understand and manage the various streams of revenue and expenses at their firm had been a nightmare before, now Jake and Lisa received monthly, detailed reports broken down in a clear, concise way. Jake and Lisa finally had vital account information at their fingertips, up to date within ten days of the end of the month. No more waiting for and fussing with flash drives!

Moving their banking and bill pay systems online alleviated the need for paper checks and reports, which made Neighborhood Financial more organized and efficient than ever before.

All this led to surprisingly big benefits for Jake, Lisa and Neighborhood Financial: more peace of mind, better control of their account information, and best of all, more time to devote to their clients. 


Does this story sound familiar to you? Have you been wondering how updating the way your business handles partnership accounting would improve your work? If so, we’d love to connect with you!

Call us now!